IMPORTANT INFORMATION FOR PRIVATE INVESTORS

Our investments place your capital at risk. We do not provide investment, tax or legal advice and we recommend you seek professional advice if you are considering investing with us. You may lose part or all of the amount you invest with us. We invest in unquoted shares in small companies. The value of these shares can be volatile, and the shares are often difficult to sell. The tax reliefs associated with our investments depend on the individual circumstances of each investor and may be subject to change. Past performance is not a reliable indicator of future results. Our forecasts and performance targets cannot accurately predict how investments will perform.

State of the tech market – two sides of the same coin

Is the US tech sector signalling the peak of the market and the coming of the next crash? Has the $50bn valuation of Uber caused the first reverberations that will hit the US tech market? Will Europe feel the full force of a hurricane that is to come? Or, with the explosion of smart devices and a globally connected population, is it really different this time? Let’s take a look at some of these opposing views.

Dan Primack, long time blogger on VC, showed some of his bearish views in his interesting article in Fortune.com. He explains the fact that venture backed companies are not selling so easily. Only seven VC-backed tech companies have gone public so far this year and the pipeline of IPOs is not pretty dry with only Fitbit having registered with the SEC. In the UK, Wonga is a case in point – the company was on the verge of an IPO when the FCA cracked down on it and this has probably set back its hopes of a listing by some years, possibly also for a trade sale, if it is seen as a bit ‘toxic’. Many companies have achieved high valuations, but neither the entrepreneurs nor the VCs are realizing their investments. Paper profits have limited use.

M&A activity shows a similar drought with only two $1bn+ M&A deals having completed in H1 2015, a number that is strangely low, compared with the hype that surrounds Sand Hill Road and the unicorns.

In Europe, nearly all the unicorns still have founders at the helm. Perhaps their desire for control is holding them back from going public. The level of ambition of the 30-something generation of entrepreneurs is greater than we have seen for decades. They are young and, perhaps, in less of a hurry than their 40-something VCs to get paid.

Andreesen Horowitz have published their review of tech funding. It makes a strong case for why ‘this time it’s different’ – it’s always different. Yes, valuations are high, but so are profits. And just look at the number of global internet users. They have risen from 40 million in 2000 to 3 billion in 2014. And these numbers will keep rising to 4 billion by 2020 – 100x in 20 years. On top of that, by 2020, there will be 4 billion people with a smartphone. Almost all of them can be accessed from anywhere, buy anything, connect, reach, socialise, contribute. They agree that valuations are high, but this is limited to a small number of large deals, and that this is rebalancing from IPOs as many of the largest investors are committing to late stage private rounds. This is where they are finding returns – performance post IPO has been disappointing in several high profile IPOs over the past couple of years.

There has not been a surge of funding into VC funds. Yes, there is more press and prominence than there has been for years. The buyout funds had all the press and LP attention for years, but now the VCs have raised their heads above the parapet. But the numbers are still relatively small, both in absolute terms and in proportion of GDP (under 3% in the US and less in Europe).

More people are becoming entrepreneurs. The cost (and risk) of creating a tech company has plummeted, mainly as a result of cheap computing power and increasingly with innovations such as 3D printing which is slashing tooling costs for physical goods. The number of start-ups being created has more than doubled in the US in the past 5 years. Any one visiting London, Berlin, Stockholm or Paris will be unable to avoid the buzz of entrepreneurial activity. A new generation of risk takers is busy creating the value of tomorrow. Yes, many will fail. Some will try again. More and more will succeed. The laws of numbers – more companies and more entrepreneurs – will prevail and generate more successes. If success breeds success, then the future is bright.

OXFORD OFFICE

The investments referred to on this website will place your capital at risk. Oxford Capital Partners LLP’s products and funds invest in unlisted companies which are likely to be harder to value and sell than quoted shares. Please note that tax reliefs are dependent on investors’ individual circumstance and are subject to change. Where reference is made to past or future performance this should not be taken as a reliable indicator of future results. Oxford Capital Partners LLP does not provide advice and the information on this website should not be construed as such. Investors should seek advice from a regulated adviser.

At Oxford Capital we have quickly adjusted to the ‘new normal’ of working within the restrictions of Covid-19. All of our team are working effectively from home, and our operations are carrying on as normal. The health and wellbeing of our colleagues and their loved ones remains paramount and we are focused not only on maintaining business as usual but on keeping morale high in an environment of much less social interaction. We recently welcomed our first remote new hire and our team has rallied in supporting her induction. We recognise the challenges of juggling home and work life at the moment, and are touched by the positive attitude and adaptability with which everyone has responded. The technology of Teams, Skype and Zoom has become routine for daily interactions both inside and outside the firm, and we are communicating with clients, founders and business partners as usual. We have also enjoyed getting to know better the children, partners and pets of our colleagues and friends, bringing moments of laughter, joy and humanity.

Clients’ investments are being managed as normal by our investment team. We continue to attend portfolio board meetings and other meetings as usual, albeit remotely. Many of the usual business events and conferences that we are used to participating in are being hosted online and we participate and contribute as normally as we can.

It is important during times of such uncertainty to remember that investing in small private companies is a long-term activity. We seek to guide and support our founders and portfolio companies through their respective challenges, drawing on our own experience of past crises and on good teamwork. Following an intense period of working with our portfolio companies to assess the impact of Covid-19, we have supported action where required to take early measures to reduce costs and extend cash runways. Much of our thinking is now turned to the positioning of companies for long term opportunities as the market takes a leap forwards in accelerating digital transformation in many sectors of the economy, often building on trends that pre-existed the crisis. Many of the companies in the portfolio have demonstrated their commitment to social responsibility by supporting the NHS and key workers, governments and supporting their own staff and families. We support these efforts simply as they are the right thing to do.

At Oxford Capital we continue as normal whilst anticipating the next “new normal”. No employees have been furloughed. We are fortunate to work in a business which is willing to help others. We do our best to support each other and our loved ones, just as we endeavour to support our investee companies. We salute Captain Tom for his extraordinary fund raising efforts. We also recognise the efforts of our portfolio companies and so many entrepreneurs as they navigate the Covid-19 challenges. We hope that these efforts will contribute to the success of our nation’s economic revival and to value for our investor-clients.